Riaz Haq writes this data-driven blog to provide information, express his opinions and make comments on many topics. Subjects include personal activities, education, South Asia, South Asian community, regional and international affairs and US politics to financial markets. For investors interested in South Asia, Riaz has another blog called South Asia Investor at http://southasiainvestor.blogspot.com and a YouTube video channel https://www.youtube.com/channel/UCkrIDyFbC9N9evXYb9cA_gQ

Tuesday, April 17, 2012

Pakistan's Shale Gas With US & KSA Help?

There are strong rumors that Kingdom of Saudi Arabia has joined the United States to oppose Iran-Pakistan gas pipeline project for which Pakistan is trying to arrange financing in the face of tightening US sanction on Iran.

The Chinese have already pulled out of the project after the US imposed sanctions on banks and other entities dealing with projects and transactions involving Iran. Russia's Gazprom is reportedly interested in financing and constructing the Pakistan section of the pipeline, but only on the condition that the project be awarded to it without any competitive bidding.

The question now is how should Pakistan deal with the situation? Can Pakistan satisfy its growing energy needs without alienating the Saudis and avoiding crippling US sanctions which could be more damaging than its current energy crisis?

2. US oil and gas companies are pioneers and leaders in shale gas development. In fact, these firms have been so successful that there is now a gas glut in the United States and gas prices have plummeted to less than $2 per mmBTU (approx 1000 cubic feet).

3. Iran-Pakistan deal requires Pakistan to pay $11-12 per mmBTU for its gas, six times the current price in the United States. Since the pricing formula for Iranian gas is based on the price of oil, it's almost certain that Pakistan will end up paying more than $12 per mmBTU with rising oil prices in the future.

Considering the above-mentioned facts, I think the best option for Pakistan is to go with its own domestic shale gas at a fraction of the price Iran is demanding.

Pakistan's best interest is not in defying Saudis and Americans to buy expensive Iranian gas and end up with crippling sanctions which could be much worse than its current energy crisis. Its best interests will be served by developing its own cheap domestic shale gas on an accelerated schedule with Saudi investment and US tech know-how. If the Americans and the Saudis refuse to help, then Pakistan will have a stronger case to go with the Iran gas option.

>Russian President-elect Vladimir Putin will, on his first foreign tour after taking office, make his first stop in Pakistan. It symbolizes not just Pakistan’s importance in the region, but the shift in relations which means that the two countries, kept apart for so many years because of Russia’s espousal of Communism, are trying to come together. Russia seeks a new ally in the region, to substitute for India, now in the American lap, after the collapse of the USSR. Mr Putin’s visit shows that Russia intends to play a more proactive role in world affairs. It must do so, because by ceding to US supremacy, it has seen it not just invade Afghanistan physically, but threaten Iran. Russia has found its own physical space threatened by US expansionism, with the expansion of Nato threatening it in the West, the snatching away of India and the occupation of Afghanistan threatening it in Asia. The visit is a result of the successful visits to Russia by President Asif Zardari, in August 2010 for the Quadrilateral Summit, and by Foreign Minister Hina Rabbani Khar earlier this year.

Russia had previously tried to make headway in Pakistan through the Steel Mills project, and now it has offered to be involved in the Iran-Pakistan gas pipeline project. This is an offer that Pakistan must not hesitate to take up. While Pakistan's official 'ally' has done its best to sabotage the project, and has insisted India withdraw from it, Russia is extending a helping hand. Unlike the steel mills, the pipeline from Iran is existential, providing as it will, gas not just for domestic and industrial users, but also for power production. Thus not just for strategic concerns, but national interest should incline Pakistan towards Russia. However, as strategic concerns include Afghanistan, which Russia has been deeply interested in for a very long time, Russia would also be interested in how Pakistan sees the future of Afghanistan.

It should also be recognized that Russia has a deep interest in the reset in relations between the USA and Pakistan that is presently being discussed by the joint sitting of Parliament. Russia too has seen that the US has not just gained access to South Asia through Pakistan, but also Central Asia. As Russia is seeking an ally in the region to substitute for India, and as Pakistan is distanced from the USA, Russia is naturally more interested in Pakistan than ever before. President Putin’s visit, the first ever by a Russian President to Pakistan, reflects that.

Pakistan will renegotiate gas price with Iran under the (IP) gas pipeline project as the price of Turkmenistan-Afghanistan-Pakistan-India (Tapi) gas is cheaper, sources close to Petroleum Secretary told Business Recorder.

This was disclosed at a meeting of Economic Co-ordination Committee (ECC) of the Cabinet held on April 12, 2012 under the chairmanship of Finance Minister Dr Abdul Hafeez Shaikh.

The IP gas price was $11 per mmcfd while Tapi was estimated at $13 per mmcfd.

However, a week ago in a meeting in the Ministry of Petroleum and Natural Resources it was revealed that Turkmenistan has agreed to reduce the price from 55 percent price parity with international crude price to 45 percent.

In addition, Pakistan would also earn a transit fee from Tapi while India is not party to IP anymore.

Official documents available with Business Recorder reveal that the ECC was informed that matter for signing of Gas Sales Purchase Agreement (GSPA) with regard to TAPI gas pipeline project, during the visit of the Turkmen President on 14th November 2011, was placed before the ECC in its meeting held on 11th November 2011.

However, the ECC decided that, instead of signing GSPA at this stage, a single-page document containing the intention of both the governments of Pakistan and Turkmenistan, may be signed during the visit of the Turkmen President and the draft GSPA be annexed to that one-page document, for subject approval of the government.

The ECC also constituted a committee for drafting the proposed one-page document.

The committee prepared the requisite one-page document (Joint Declaration), which was accordingly signed by both sides on 14th November 2011.

Subsequently, the matter of TAPI GSPA including gas price formula, agreed base price, risk sharing mechanism with regard to transportation cost, transit fee and gas price review mechanism was considered by the ECC in its meeting held on 20th January, 2012.

The ECC constituted a committee headed by the Minister for Water and Power to examine the details concerning price and pricing formula for gas to be imported from Turkmenistan and submit its recommendation to the ECC.

Qamar-led committee in its meeting held on 6th April, 2012 examined the gas price formula, agreed based price, risk sharing mechanism with regard to transportation cost, transit fee and gas price review mechanism and recommended it for approval of the ECC.

Based upon the foregoing, the ECC was requested to approve the draft GSPA for execution by Inter State Gas Systems (Pvt) Ltd with Turkmenistan (Turkmengaz) including gas price formula, agreed to, risk sharing mechanism and gas price review mechanism.

During the ensuing discussion, it was explained that gas to be imported from Turkmenistan will be cheaper than the gas to be imported from Iran.

Resultantly, Pakistan will be able to re-negotiate the gas price with Iran.

On a query, the ECC was informed that penalty clauses in TAPI GSPA are similar to those contained in Iran-Pakistan GSPA, where-under Pakistan will be liable for payment towards cost of gas even if no gas is imported.

These conditions will be effective after construction of pipeline.....

Discussions between the governments of Iran and Pakistan started in 1994.[3] A preliminary agreement was signed in 1995. This agreement foresaw construction of a pipeline from South Pars gas field to Karachi in Pakistan. Later Iran made a proposal to extend the pipeline from Pakistan into India. In February 1999, a preliminary agreement between Iran and India was signed.[4]

In 2004 the project was revived after the UNDP's report Peace and Prosperity Gas Pipelines by Gulfaraz Ahmed was published in December 2003. The report highlighted benefits of the pipeline to Pakistan, India and Iran.[citation needed]

In February 2007, India and Pakistan agreed to pay Iran US$4.93 per million British thermal units (US$4.67/GJ) but some details relating to price adjustment remained open to further negotiation.[5]

In April 2008, Iran expressed interest in the People's Republic of China's participation in the project.[6] In August 2010, Iran invited Bangladesh to join the project.[7]

In 2009, India withdrew from the project over pricing and security issues, and after signing a civilian nuclear deal with the United States in 2008.[8][9] However, in March 2010 India called on Pakistan and Iran for trilateral talks to be held in May 2010 in Tehran.[10]

In January 2010, the United States asked Pakistan to abandon the pipeline project. If canceling the project, Pakistan would receive assistance from the United States for construction of a liquefied natural gas terminal and importing electricity from Tajikistan through Afghanistan's Wakhan Corridor.[11] However, on 16 March 2010 in Ankara, Iran and Pakistan signed an agreement on the pipeline.[8] According to the agreement each country must complete its section by 2014.[12] In July 2011, Iran announced that it has completed construction of its section.[13] If Pakistan does not fulfill its obligation to complete the pipeline on its side by the end of 2014, it will have to pay a daily penalty of $1 million to Iran until completion.[14] On 13 March 2012 Pakistan's ministry of finance announced that private investors were showing diminished interest and that the government might have to impose a tax on consumers, or seek government-to-government arrangements with Iran, China and Russia to build the pipeline. On 29 March it was reported that officials from Pakistan’s petroleum ministry would travel to Russia in early April for talks with Gazprom.[12] Then, in a 7 April article the Pakistani daily PakTribune reported that Gazprom would both finance and construct the pipeline. This would require setting aside the Public Procurement Regulatory Authority rules which require international bidding for such a large project. The Economic Coordination Committee would be asked in its next meeting to give such permission. The article also informed that the reason the private consortium no longer would contribute to the project was US opposition.[14]

On 15 April 2012 it was reported through unnamed diplomatic sources in Islamabad that Saudi Arabia was offering to deliver an "alternative package" to Pakistan if the country abandoned its cooperation with Iran. In addition to oil the package would also include a cash loan and oil facility. The news came in connection with a visit to Pakistan by the Saudi deputy foreign minister.[15]

Pakistan and Turkmenistan were scheduled to sign the GSPA agreement on April 17 but postponed it due to negotiations between India, Afghanistan and Pakistan on transit fee here in Islamabad next week, a government official told The Express Tribune.

Official said that Pakistan and Turkmenistan had finalised to keep gas price at 70% of crude oil price, much lower than the 78% parity agreed with Iran in the Iran-Pakistan gas pipeline.

“The two countries have agreed to review gas price after every five years,” official said adding that now GSPA is expected to be signed on May 20 in Turkmenistan. Earlier, Pakistan wanted to review gas price after three years keeping in view the trend in oil prices while Turkmenistan wanted it to be fixed for ten years.

The three countries will hold two-day talks from Monday in Islamabad to discuss the fees for transmission of gas from Turkmenistan through Afghanistan and Pakistan to India. In discussions already held on transit fees, Afghanistan opted for Pakistan to pay the fee in the form of gas but Pakistan opposed and proposed to pay it in cash.

Under the initial TAPI project, Pakistan and India are both scheduled to receive 1.365 billion cubic feet of gas per day (bcfd) and Afghanistan 0.5 bcfd.

However, Afghanistan in a meeting earlier this year with Pakistan informed that it does not want gas supply from the project anymore and only transit fee for use of its territory.

If Afghanistan withdraws, its share will be evenly distributed between Pakistan and India,” official said adding that this issue will also come under discussion during talks scheduled next week.

Afghan and Pakistani officials had discussed three different proposals in first week of February in Islamabad relating transit fee that included fee in cash or kind and fixed fee in dollar term on volume of gas from Turkmenistan. The last option was to link transit fee with per kilometre length of gas pipeline. “These proposals will again be discussed to reach agreement on transit fee,” official added.

Pakistan and Turkmenistan were scheduled to sign the GSPA agreement on April 17 but postponed it due to negotiations between India, Afghanistan and Pakistan on transit fee here in Islamabad next week, a government official told The Express Tribune.

Official said that Pakistan and Turkmenistan had finalised to keep gas price at 70% of crude oil price, much lower than the 78% parity agreed with Iran in the Iran-Pakistan gas pipeline.

“The two countries have agreed to review gas price after every five years,” official said adding that now GSPA is expected to be signed on May 20 in Turkmenistan. Earlier, Pakistan wanted to review gas price after three years keeping in view the trend in oil prices while Turkmenistan wanted it to be fixed for ten years.

The three countries will hold two-day talks from Monday in Islamabad to discuss the fees for transmission of gas from Turkmenistan through Afghanistan and Pakistan to India. In discussions already held on transit fees, Afghanistan opted for Pakistan to pay the fee in the form of gas but Pakistan opposed and proposed to pay it in cash.

Under the initial TAPI project, Pakistan and India are both scheduled to receive 1.365 billion cubic feet of gas per day (bcfd) and Afghanistan 0.5 bcfd.

However, Afghanistan in a meeting earlier this year with Pakistan informed that it does not want gas supply from the project anymore and only transit fee for use of its territory.

If Afghanistan withdraws, its share will be evenly distributed between Pakistan and India,” official said adding that this issue will also come under discussion during talks scheduled next week.

Afghan and Pakistani officials had discussed three different proposals in first week of February in Islamabad relating transit fee that included fee in cash or kind and fixed fee in dollar term on volume of gas from Turkmenistan. The last option was to link transit fee with per kilometre length of gas pipeline. “These proposals will again be discussed to reach agreement on transit fee,” official added.

Rs9.33 billion in the first nine months of fiscal 2012 with rising oil and gas prices acting as a blessing.

International oil prices, key determinant of local rates, have increased by an estimated 11% to $101 per barrel on a yearly basis. Similarly, price for gas is estimated to have increased by 13% to Rs290 per million cubic feet on a yearly basis.

This took the company’s net revenue up 21% to Rs22.0 billion during July 2011 and March 2012, according to a notice sent to the Karachi Stock Exchange.

Other income surged 71% amid higher payouts from its associate companies and improved cash position. Attock Group of Companies’ exploration wing booked dividend from National Refinery in the second quarter of the financial year.

Decline in exploration cost of 68% culminated from conservative exploration activity and announcement of no dry well helped bring down expenses.

Marginal increase in company’s oil and gas production, up approximately 4% and 3% respectively, on account of higher production from its non-operating Tal block compensated subdued production from its operating block.

However, earning growth was partially diluted due to increase in company’s amortisation and decommissioning cost. The company booked amortisation and decommissioning cost worth of Rs1.4 billion against Rs763 million last year.

The company reported the negative surprise in the previous quarter under ‘amortisation and decommissioning cost’, which is expected to persist going forward.

The company’s stock price crawled up 0.62% to Rs377.72 amid announcement of results in line with market expectations.

The stock has underperformed the benchmark stock index by 9% in 2012 owing to concerns of dry well findings in Domial and Dhulian Deep.

However, news flows from Dhulian Deep and Makori East-2 to act as near-term triggers for the stock.

Meanwhile, Attock Petroleum’s profits jumped 14% to Rs4.47 billion on the back of improved volumetric sales by 21% on a yearly basis.

India — India has long struggled to provide enough electricity to light its homes and power its industry around the clock. In recent years, the government and private sector sought to change that by building scores of new power plants.

But that campaign is now running into difficulties because the country cannot get enough fuel — principally coal — to run the plants. Clumsy policies, poor management and environmental concerns have hampered the country’s efforts to dig up fuel fast enough to keep up with its growing need for power.

A complex system of subsidies and price controls has limited investment, particularly in resources like coal and natural gas. It has also created anomalies, like retail electricity prices that are lower than the cost of producing power, which lead to big losses at state-owned utilities. An unsettled debate about how much of its forests India should turn over to mining has also limited coal production.

The power sector’s problems have substantially contributed to a second year of slowing economic growth in India, to an estimated 7 percent this year, from nearly 10 percent in 2010. Businesses report that more frequent blackouts have forced them to lower production and spend significantly more on diesel fuel to run backup generators.

The slowdown is palpable at Sowmya Industries, a small company that makes metal shutters that hold wet concrete in place while it solidifies into columns and beams, a crucial tool for the construction industry.

The company, located outside this city on the southeast coast of India, is struggling with several issues, including a 20 percent increase in the price of raw materials and falling orders.

But Sowmya’s manager, R. Narasimha Murthy, said the lack of reliable power was an even bigger problem. His company loses three hours of power every evening. And all day on Wednesdays and Saturdays — euphemistically called “power holidays” — it receives only enough electricity to turn on the lights but not enough to use its large metal-cutting machines. -------------A major problem is the anemic production of coal, which provides 55 percent of India’s electricity. Coal production increased just 1 percent last year while power plant capacity jumped 11 percent. Some electricity producers have been importing coal, but that option has become more untenable recently because India’s biggest supplier, Indonesia, has doubled coal prices. ------------For many businesses, the power shortage has become debilitating.

In the southern state of Tamil Nadu, Srihari Balakrishnan, a textile factory owner, said he goes through 6,300 gallons of diesel fuel on an average day to keep his operation running, spending $3,000 more than he would if power were available around the clock.

“We are not able to use 20 to 30 percent of our capacity,” he said. “We can’t use grid power for two full days of the week. When we have power, we have a six-hour cut,” he added, using an Indian term for blackouts. ----------Other companies are also stuck. Reliance Power, controlled by the investor Anil Ambani, says it has stopped construction on a large electricity plant nearby because it can no longer afford to buy coal from Indonesia as planned.

Here's Economic Times report on $10 per mmBTU TAPI gas price for India:

Natural gas from Turkmenistan would be delivered to India at an estimated price of about $10 per unit, including $3 as transportation charges and transit fee, in the proposed 1,680-km pipeline via Afghanistan and Pakistan, three persons with direct knowledge of the matter said.

Gas would be purchased at about $7 per unit at Turkmenistan but its cost would rise as it transits across two countries before reaching the Punjab border. It would be cheaper than some long-term LNG contracts, government and industry officials said. Gas-starved India pays a spot price of about $16 a unit for liquefied natural gas. Petronet LNG has recently contracted LNG import from Australia's Gorgon project at $15.8 per unit while Gail's 20-year contract with US' Sabine Pass works out to be around $10 per unit.

Here's an ET report on expected foreign inflows in Pakistan which should help stimulate the economy:

Federal Finance Minister Hafeez Shaikh, wrapping up a week long tour in Washington, said that Pakistan will be receiving as much as $5.27 billion from the US, UK and international monetary organisations over the next four years.

Having met managing director of the World Bank Sri Mulyani, the Asian Development Bank President Haruhijo Kuroda, US AID administrator Dr Rajiv Shah, Sheikh, and IMF Pakistan mission chief Adnan Mazarei among senior US officials, confirmed that both the Asian Development Bank and the US have reaffirmed investment in to the Diamer Bhasha dam project in Pakistan. “We have told the ADB to send their assessment team to Pakistan soon,” the Finance Minister said.

Addressing a press conference at the Pakistani Embassy in Washington, DC, Shaikh said that the US has also agreed to invest in the renovation of the Mangla Dam, and for the Kurram-Tangi dam project. He said the US government had notified Congress that it would be spending $223 million on the projects.

Shaikh, who is wrapping up a one-week trip to Washington DC where he and his finance team attended the IMF/World Bank Spring Meetings 2012, said the International Finance Corporation, part of the WB group, would also invest $1 billion in various sectors in Pakistan’s private sector, including energy and finance. Shaikh said that the IFC investment was the highest for the group in Pakistan. He also added that the World Bank had increased its spending on Pakistan from $1.6 to $1.8 billion. Dr Shaikh also said that Britain had announced that Pakistan would be its biggest recipient of aid. “Britain will spend over $2.25 billion over the next four years, primarily in the field of education.”

While highlighting the increasing number of remittances, a higher growth rate and growing exports as signs of progress in Pakistan’s economy, Dr Shaikh said that the rising oil prices may impact Pakistani exports in the future. He added that if the economic conditions of Europe worsened, that too could impact Pakistan.

Record breaking foreign remittances expected

Shaikh said that Pakistan is due to receive a record $13.5 billion in foreign remittances this year in a sign of confidence of overseas Pakistanis’ in the economic policies of the government. “Overseas Pakistanis posing confidence in Pakistan, will send $ 13.5 billion this year, reflecting a 21 per cent increase from last year’s $ 11.2 billion,” the finance minister proudly announced at the press briefing.

Claiming that the national economy was now on the path to stability and growth, Dr Shaikh said that Islamabad’s policies are yielding results despite soaring international oil prices and uncertain global economic situation and that this year Pakistan’s economy will grow at four per cent of the GDP, the highest growth seen over the past five years.

He recounted a host of positive indicators including six per cent expansion in exports, which follow a 30 per cent increase in exports last year, and a jump of 25 per cent in revenue collection in the past nine..

KARACHI: The government is working on an alternative plan to finance the $1.5 billion Iran-Pakistan (IP) gas pipeline as hopes for funding from Russia fade in the face of mounting pressure from the US to stop the project, says a senior government official.

Earlier, a Chinese bank backed out of financing the vital gas supply project which may ease most of the energy shortage in the country.

“In the alternative plan, the government is studying a joint investment formula, according to which the engineering, procurement and construction (EPC) contractors will be invited to provide some funds for the pipeline,” the official said.

In talks held between Pakistani and Russian officials in the first week of April in Moscow, Pakistan asked Russia to either extend a loan or provide finished products and other material relating to the pipeline. Russia agreed to respond to the proposal in two weeks, but no response has been received so far.

After the return of the delegation from Moscow, the government officials had, however, announced that Russia had agreed in principle to give financial and technical assistance for the pipeline.

“A reminder has been sent to Russia in this regard and it is to reply by April 30,” the official said. Petroleum Secretary Ijaz Chaudhry also confirmed that Russia had not yet responded to the proposal.

Pakistan approached Russia after a Chinese bank hinted at its inability to push ahead with financing the project amid increasing US pressure. Russia offered to finance the entire pipeline during a four-day visit of Foreign Minister Hina Rabbani Khar to Moscow in February.

Moscow linked the proposal with the award of contract to its energy giant, Gazprom, without bidding. However, to give its consent the government will have to waive Public Procurement Regulatory Authority (PPRA) rules, designed to ensure transparency in government dealings.

“Funds will be generated through infrastructure gas development cess and EPC contractor will also be asked to extend some financing,” the official said, adding the government would make it part of the tender for EPC contract....

The shale gas boom in the US has led to a big drop in its carbon emissions, as power generators switch from coal to cheap gas, reports Financial Times:

According to the International Energy Agency, US energy-related emissions of carbon dioxide, the main greenhouse gas, fell by 450m tonnes over the past five years – the largest drop among all countries surveyed.

Fatih Birol, IEA chief economist, attributed the fall to improvements in fuel efficiency in the transport sector and a “major shift” from coal to gas in the power sector. “This is a success story based on a combination of policy and technology – policy driving greater efficiency and technology making shale gas production viable,” Mr Birol told the Financial Times.

Shale gas has transformed the US energy landscape, with surging production pushing gas prices down to 10-year lows and heralding an industrial renaissance. But it is also the subject of a heated environmental debate, with critics alleging that the production process can pollute groundwater.

Gas is fast becoming the new fuel of choice for the US power sector: in the past 12 months, coal generation has slumped by 19 per cent while gas generation has increased by 38 per cent, according to US Department of Energy figures. A gas-fired plant produces half the CO2 emissions of a coal-fired one.

Overall, however, the IEA said 31.6 gigatonnes of CO2 were released into the atmosphere last year, mainly through the burning of fossil fuels – one gigatonne more than in 2010 and much higher than the average annual increase of 0.6 GT between 2006 and 2010. “The impact of this increase is going to be catastrophic,” said John Sauven, executive director of Greenpeace. “We’ve really got to act now, with a real sense of urgency – which up till now has been completely lacking.”

The increase will make it harder to keep global temperatures from rising more than 2 degrees Celsius above pre-industrial levels – which scientists believe is the threshold for potentially “dangerous climate change”.

Here's Indian Bhadrakumar on Russian ties with Pakistan as published in ATOL:

The building blocks of the historic visit by Russian President Vladimir Putin to Pakistan in September have begun arriving in Islamabad. It is a poignant moment in the region's history and politics. This will be the first time a Russian president visits Pakistan since its birth in 1947. --------------

Besides, in immediate terms, mutual understanding with Pakistan is becoming an imperative need for Russia in the post-2014 scenario in Afghanistan, where the Western powers would have withdrawn the bulk of their troops but are nonetheless establishing an open-ended, sizeable military presence of tens of thousands of combat troops.

Russia and Pakistan are joined in their opposition to the long-term occupation of Afghanistan by the West; Russia hopes to influence Pakistani policies with regard to Afghanistan's future and, in turn, cooperation with Pakistan enhances the overall Russian resilience to play an effective role in the stabilization of Afghanistan and in providing security to Central Asia; and, equally, a strong relationship with Pakistan - in the field of energy security, in particular - can provide yet another underpinning for Russia's strategic ties with other key regional powers, especially China, India, Iran and Saudi Arabia.

Last but not the least, Pakistan is a valuable interlocutor for Russia with regard to the activities and movements of the militants operating in North Caucasus. -------A stunning thing is that the proposals brought by the Russian experts in the past week to Islamabad essentially pick up the threads of Putin's 2006 proposal. According to the details available so far, Moscow has made the following proposals to Islamabad: Russia can offer financial and technical assistance for Pakistan's multi-billion dollar gas and power import projects that are in the pipeline. Specifically, Russia is interested in participating in the two big gas pipeline projects on the anvil, namely, the TAPI (Turkmenistan-Afghanistan-Pakistan-India) and the IP [Iran-Pakistan]. Russia prefers that the cooperation is negotiated at the governmental level through direct negotiations rather than through bidding. Russia is also keen on participation in the Central Asia and South Asia (CASA) project, which was originally floated in 2006, to bring to Pakistan via transmission lines across eastern Afghanistan 1,000-1,300 megawatts of surplus energy during the summer months from Tajikistan and Kyrgyzstan. (The project has the backing of the World Bank and the Islamic Development Bank.) Russia will be willing to cooperate in the exploration of oil, gas and minerals in Pakistan.

Unsurprisingly, Islamabad has eagerly responded to the Russian proposals. The following understanding seems to have been reached at the talks, which concluded in Islamabad on Wednesday: Pakistan welcomes the Russian proposals; Specifically, Pakistan is agreeable to negotiate the contracts with the state-owned Russian energy companies on a government-to-government basis and will be willing to amend its public procurement rules accordingly; Steps will be taken to conclude a memorandum of understanding to move ahead with the identified projects during Putin's visit; As regards the IP, Pakistan has already floated the tenders for awarding contracts for the pipeline procurement and construction work for the US$1.5 billion project. Russia's Gazprom may also participate. Pakistan proposes to give weight to bids that have a financial package attached. (China and Iran have also shown interest in the project.) Meanwhile, Pakistan will hand over to Russia by mid-July a draft agreement for financial and technical assistance from the latter for the IP project. Russia has agreed to finance the rehabilitation of the Guddu and Muzaffargarh power plants. ...

During Putin’s trip, the two countries are expected to sign a memorandum of understanding to push ahead with assistance for the power and gas supply projects. Representatives of Russian companies are also likely to accompany the president, who may announce investment in oil, gas and mineral exploration in Pakistan, officials say.

Under the energy cooperation programme, Pakistan has shown willingness to award a contract without bidding for the multi-billion-dollar Iran-Pakistan gas pipeline. Russia has also offered financing for the transnational Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline project.

The government desires to strike gas project contracts on government-to-government basis only, with no role for private Russian firms. The cabinet may be asked to waive public procurement rules for the award of pipeline contracts to Russia.

The government has already floated tenders, inviting bids for construction and procurement of pipeline for the IP project, costing $1.5 billion. According to the tender terms, the firms that promise financing will get additional points.

“Russian energy giant Gazprom may also participate in the bidding with a pledge of financing,” a government official said.

At present, Pakistan is negotiating the construction of IP gas pipeline with three countries – Iran, China and Russia.

“We will award IP contract to the country which first extends financing for constructing the pipeline, staving off pressure from the United States,” the official said.

Iran has also come up with a plan to lay Pakistan’s portion of the pipeline based on a mechanism called ‘supplier’s credit’. According to the plan, Tehran will provide the pipeline and compressors on credit to Pakistan, which will make payments after two years.

Iran is also willing to provide $250 million on government-to-government basis and can extend a major part of financing from its commercial banks. Pakistan needs around $500 million to finance the pipeline.

Power, steel mill projects

“Moscow has also agreed to finance rehabilitation of Guddu and Muzaffargarh power plants and a deal may be reached in this connection during the Russian president’s visit,” an official of the Ministry of Water and Power said.

In addition to this, the two countries may enter into a deal for expansion of financially troubled Pakistan Steel Mills. During the working group meeting held late last month, they had discussed ways of enhancing the capacity of the steel mill with promise of Russian support.

Under the programme, the mill’s production capacity will be enhanced to 1.5 million tons per annum from existing 1.1 million tons. Initial cost of the project is estimated at Rs30.45 billion, though actual cost will be determined after a technical audit of the plant by a Russian company.

Russia has linked provision of financing for the project with award of contract to its state-owned firm VO Tyazhpromexport.

In the working group meeting, the Russian authorities offered $500 million for the Central Asia South Asia (CASA) electricity import project, which would bring electricity from Central Asian states.

Under the project floated in 2006, 1,000 to 1,300 megawatts of surplus electricity will be imported from Tajikistan and Kyrgyzstan. “US, World Bank and Islamic Development Bank (IDB) have also backed the project,” an official said.

US energy giant ConocoPhillips is mediating between Pakistan and Qatar to enable them to strike a multi-billion-dollar liquefied natural gas (LNG) deal, in an apparent attempt to drive Islamabad away from the Iran-Pakistan (IP) gas pipeline project due to tensions between the West and Tehran.

An official of the Ministry of Petroleum and Natural Resources told Our Sources that the Qatari government had designated ConocoPhillips to clinch an LNG supply deal with Pakistan.

Earlier, Qatar had asked Shell to finalise the LNG contract with Pakistan, which could not be reached due to controversy over the Mashal LNG import project.

According to sources, high-ups of the petroleum ministry went to Dubai and London this month to hold negotiations with representatives of the US energy company on the terms of LNG contract.

"Former US Secretary of State Richard Armitage is a member of the board of ConocoPhillips and playing a role to help Pakistan and Qatar reach an agreement," a senior government official said. This may force the government to shelve the IP pipeline project, he said.

Headquartered in Houston (Texas), ConocoPhillips has operations in about 30 countries and has a 30% share in oil and gas reserves being explored under the Qatargas-III project in the North Field near the Iranian border from where LNG will be supplied to Pakistan.

Under the IP pipeline project, Pakistan will get gas from Iran's South Pars field, the world's largest gas field situated along the Iranian border with Qatar in the Persian Gulf. The Qatari side of the field is called the North Field.

According to reports, delay and low production by Iran may shift some gas reserves to the Qatari side and lead to loss of yield due to low field pressure.

Pakistan and Qatar have already signed a memorandum of understanding, under which Islamabad will import 500 million cubic feet per day (mmcfd) of LNG to generate 2,500 megawatts of electricity.

According to the term sheet, Qatar had demanded a price of $18 per million British thermal units (mmbtu) for LNG supply. In response, Pakistan quoted a price of $10 per mmbtu.

"Pakistan and ConocoPhillips are discussing terms of the agreement and price is also part of the discussion," the government official said.

US embassy officials in Pakistan have also been lobbying and holding meetings with stakeholders of the power and energy sector to try to convince them that the Iran gas project will not be viable for Pakistan.

The US diplomats stress that Pakistan should shelve the IP project, terming it 'bad' and call for inking an LNG deal with Qatar to meet the country's pressing energy needs.

"Pakistan should shelve the IP gas pipeline project and move ahead with LNG deals," a US diplomat said on condition of anonymity.

The petroleum ministry is also receiving technical help from USAID consultants for LNG import.

A PPL statement here on Saturday said that developed by NXT Energy Solutions (NXT), a geophysical service company based in Canada, SFD is a proprietary cutting edge, eco-friendly airborne reconnaissance method to identify potential hydrocarbon traps and reservoirs in a time- and cost-effective manner, especially in unexplored on- and off-shore frontier regions with limited access and infrastructure.

It said that the SFD is expected to be particularly useful in the current energy scenario, warranting fast track identification of, and production from, relatively deeper, more complex reserves of hydrocarbons to bridge the supply-demand gap.

Welcoming the guests, PPL's Managing Director and Chief Executive Officer, Asim Murtaza Khan, underscored the increasing importance of deploying latest exploration technology to meet production and reserves replacement targets to address the current deficit and ensure future energy security. SFD technology has been successfully applied by leading oil and gas companies in North America, Colombia and other countries. PPL is proud to be the first company to apply the technology in Pakistan', he said.

...Asif Ali Zardari, Pakistan’s president, unexpectedly cancelled a trip to Iran at the last minute in December, amid concerns in Islamabad over stiff US opposition to a project considered essential for tackling mounting energy shortages. Some Pakistani officials had expected Mr Zardari to consent to the project during the trip.

The plan would see Pakistan build a pipeline connecting its national gas supply grid in the southern Sindh province to the Iranian border in southwest Baluchistan. Iranian officials say they have already built the pipeline on their side of the border to within 100km of Pakistan.

The US has opposed the pipeline on the grounds it would inject foreign exchange into the Iranian economy at a time when western countries have imposed a number of ever tighter sanctions in an effort to prevent Tehran from advancing its nuclear weapons programme.

Independent economists said it was too early to predict whether the project would go ahead. “The companies involved from Pakistan may face the danger of being exposed to US-led western sanctions,” warned Sakib Sherani, an economist. “There are also technical issues in undertaking such a large project.”

However, Islamabad has become all too aware of the political and economic risks posed by chronic electricity shortages after people took to the streets in cities across the country last summer in protest at power cuts up to 20 hours long.

Pakistan appeared confident the US would not hit it with tough sanctions, according to a senior western diplomat in Islamabad. “In their [Pakistan’s] calculus, they believe that the US needs Pakistan to ensure a successful drawdown from Afghanistan by December next year,” the diplomat said.

“The Pakistanis probably believe there will be a lot of huff and puff but no painful sanctions. In all honesty, Pakistan has a terrible situation on energy and these [energy] shortages can undermine the country’s stability.”

Iran has offered its neighbour at least $500m to help finance the project. The money was “just the beginning”, the Pakistani official said. “The Iranians have said they will provide more funding for this project if there is a need.”

The Iranian pipeline offers Pakistan the shortest supply route from any gas surplus country, officials say. Asim Hussain, chief adviser on oil and natural resources to the government, told the FT last December: “It’s a feasible project for Pakistan. It’s the quickest route, the cheapest route where we can fulfil our energy needs.”

Advisor to Prime Minister on Petroleumand Natural Resources Dr. Asim said that Pakistan offers great potential in the oil and gas sector and the government is doing its part by introducing new policies to meet the rising energy demand .

He was presiding over a seminar organized by the Petroleum Institute of Pakistan (PIP), a representative body of the oil and gas industry, on the topic "Shale Gas Potential in Pakistan" on Saturday.

The purpose of holding this seminar was to create awareness aboutpotential and challenges of shale gas in Pakistan and establish PIP'sprofessional standing in view of assisting the government on dealing with the energy crises in the country.

The forum consisted of 150 distinguished guests from the oil and gas fraternity including government officials, media personnel and students from Karachi's top universities/colleges.

Dr. Asim Hussain said he has been advocating the need to balancecountry's energy mix, which currently is heavily dependent on natural gas.

He stated that the US Energy Information Administration have estimated 51 TCF Shale Gas Reserves in Pakistan, while as estimated reserves for Low BTU Gas are 2 TCF and that of tight gas are 40 TCF.

He added that Shale Gas exploration is high technical and costly, therefore, in order to encourage its exploration, pilot projects are planned.

The Ministry of Petroleum and Natural Resources will facilitate E&P Companies wishing to explore shale gas, by granting special concessions through transparent process and based on merit.

Chairman PIP Asim Murtaza Khan stressed on PIP's role as an effective energy sector advisory body, supporting government and industry in Pakistan todevelop a progressive and sustainable roadmap to meet present and futurechallenges.

He said that PIP is planning to hold series of seminars in nearfuture. The big ticket items that will be discussed and which need theimmediate attention will be the "LPG Outlook in Pakistan", "Fast-trackingimports of LNG", "Refining Vision 2020", "Energy conservation" and"Restructuring of the Pakistan's gas sector".

Here's a PakObserver report on possible US energy assistance for Pakistan:

With Pakistan fast heading to sign transnational pipeline project with Iran, US is most likely to offer a comprehensive but conditional energy assistance package as alternate to the Iranian gas.

According to diplomatic sources, the Obama Administration was contemplating to use a luring carrot this time to make Pakistan deliver in the so-called endgame in Afghanistan, besides refraining from translational gas pipeline from Iran.

Since the American strategists were working on a long-term plan to keep an influence centre in Afghanistan even after announced withdrawal of US/Nato troops from the war-torn country, they need Pakistan as a strategic partner even beyond war on terror. “That is why you hear a lot of talk back in Washington about focussing on Pakistan as a long-term partner rather than just a war ally or a facilitator of the endgame,” the sources pointed out.

The sources were of the view juxtaposition of anti-Iran and anti-drones sentiments in the American society may benefit this time in terms of a comprehensive American energy assistance package. “But this time the governments in Pakistan would have to deliver, if they really need their energy woes to be done away with,” the sources added. Consistent voices against the drones from within and outside Pakistan have perhaps made US Administration to understand that drones were practically appearing to be counter productive to the war on terror entering the decisive phase now, they underlined.

Other than strategic and political conditionality attached to prospective energy assistance package, the government in Pakistan would have to expand tax net, end blindfold government borrowing, and culture of vague subsidies.

When asked to comment on possibilities of a new US energy assistance package, US Embassy spokesperson Rian Harris said such proposals and details are not known at the embassy level in advance.

Asked what US law bars Pakistan or any other nation to indulge in business with Iran as India was also buying oil from the same country, she said, “US policy on Iran has not changed.”

“U.S. policy on Iran is well known. We have made it clear to all our interlocutors around the world that it is in their interests to avoid activities that may be prohibited by UN sanctions or sanctionable under U.S. law,” she went on.

“We recognise that Pakistan has significant energy requirements and US are committed to helping alleviate shortfalls,” Rain adds

She reminded, that is why we have invested in major energy infrastructure projects, such as renovating the Tarbela and Mangla dams, modernising the thermal power plants in Guddu, Jamshoro and Muzaffargarh, and building the Satpara and Gomal Zam dams.

These efforts have already added more than 400 megawatts of power to the national grid, and will add a total of 950MW — enough power for 2 million households — by the end of this year,” she said.

Asked how India was exempted from sanctions and buying oil from Iran, she said, “the National Defence Authorisation Act provides the ability to grant exceptions of 180 days to those countries that demonstrate they are significantly reducing their volumes of crude oil imports from Iran.

In December the Secretary of State granted exemptions to nine economies that demonstrated significant reductions of crude oil imports, including India.

Economies must take continuous steps to earn a renewal of the exemption for another 180 days through continued reductions in their purchases,” she concluded.

US Ambassador Richard Olson reiterated on Tuesday the commitment of the United States to extend full help and cooperation in resolving the energy crisis faced by Pakistan.

Addressing a function here at Tarbela Dam project, along with Water and Power Development Authority (Wapda) Chairman Syed Raghib Abbas Shah to recognise the completion of the US funded Tarbela Dam restoration project the US ambassador said, “The United States understands that Pakistan is facing an energy crisis and we are committed to doing our part.”

The restoration of three generators at Tarbela added 128 megawatts of power to the national grid.

He said, “The work completed here at Tarbela contributes enough electricity to supply two million customers, and helps provide relief to those suffering from extensive power shortages.”

Wapda Chairman Syed Raghib Abbas Shah appreciated the support of the United States to the energy sector in Pakistan.

The US Agency for International Development (USAID) provided $16.5 million to the Pakistan Wapda to repair three power generation units and to train Tarbela’s staff to operate the upgraded equipment to increase production of electricity at Tarbela.

Relieving Pakistan’s energy crisis is a top priority for US assistance to Pakistan, said Olson.

In addition to Tarbela, the United States is also funding other high impact projects, such as the rehabilitation of the Mangla dam, and renovation of thermal plants at Jamshoro, Guddu, and Muzaffagarh, which have already added over 650 megawatts since October 2009.

The US government is also co-financing the completion of the Gomal Zam and Satpara dams which will add another 35 megawatts and irrigate more than 200,000 acres.

Finally, the US is helping to replace thousands of highly inefficient agricultural and municipal water pumps throughout the country to save additional megawatts.

These projects are expected to add 900 megawatts to the national power grid by the end of 2013, enough energy to power two million households and businesses.

Here's a Dawn story on Saudi help for incoming Prime Minister Nawaz Sharif to overcome energy crisis in Pakistan:

ISLAMABAD, May 22: With an ‘amiable’ government in place, Saudi Arabia is expected to extend a bailout package of about $15 billion to Pakistan’s highly indebted energy sector by supplying crude and furnace oil on deferred payment to enable it to resolve the chronic circular debt issue.

A senior government official said the Saudis had been taking reasonable interest in helping out the incoming PML-N government led by Nawaz Sharif.

They had extended a similar special package to Pakistan soon after it went nuclear in 1998 and faced international economic sanctions.

Between 1998 and 2002, Pakistan received $3.5 billion (Rs190 billion at the exchange rate at that time) worth of oil from Saudi Arabia on deferred payment, a major part of which was converted into grant.

According to the official, as soon as the PML-N emerged as the majority party after the May 11 elections, the Saudi ambassador in Islamabad sought a briefing on the country’s oil requirements from the foreign ministry before calling on prime minister-designate Nawaz Sharif in Raiwind, Lahore.

He was immediately provided a position paper, the official said.

Pakistan expects about 100,000 barrels of crude oil and about 15,000 tons of furnace oil per day from Saudi Arabia on deferred payment for three years. The amount involved works out at about $12-15bn.

The facility can be utilised to reduce loadshedding in the short term and provide an opportunity in the medium term to restructure the power sector by minimising subsidies, eliminating circular debt, ensuring recovery from the public sector and reducing system losses to bring it to a self-sustainable level.

“During the package period, the PML-N government can resolve the electricity crisis and develop hydropower projects through a combination of public and private investments and bagasse-based power production by the sugar industry,” he said.

He said the arrangement for oil supplies on deferred payments could be further discussed during Mr Sharif’s first visit to Saudi Arabia soon after assuming the office of prime minister early next month.

Pakistan’s total crude oil import is about 400,000 barrels per day and 30,000 tons of furnace oil. Its total oil import bill stands at about $15bn per annum.

The official said a request for 100,000 barrels of oil and 15,000 tons per day of furnace oil had already been passed on through the Pakistan-Saudi Arabia Joint Ministerial Commission.

A meeting of the commission could be convened soon after the new government assumed charge, an official said.

The Saudi rulers had not taken any interest in the issue earlier ostensibly because of the chill in their relationship with the PPP government.

Large political delegations taken to Saudi Arabia by the PPP government were cold-shouldered, an official said, adding that warming up of diplomatic relations with Iran and the UAE and cancellation of hunting facilities for Saudi royals had also annoyed the kingdom.

The official said the breathing space provided by the likely Saudi package could also be used for renegotiating gas price with Iran for the Iran-Pakistan gas pipeline to bring it down to a sustainable level.

Under the gas sales and purchase price agreement, any party may seek revision of the rates in view of the cost of alternative import options one year ahead of the first gas flows scheduled to take place in December 2014.

The official ruled out any possibility that the Saudi oil package could be used to persuade Pakistan to stay away from the Iranian gas import. He said the project had reached an advanced stage and involved international agreements and, therefore, backtracking was no option, but the development could give leverage to Pakistan to secure lower gas prices.

Here's a McClatchy report on Sharif allocating no money to Iran-Pakistan gas pipeline:

Pakistan’s newly elected government Wednesday unveiled its first budget, which gave the go-ahead for buying two new nuclear power plants from China but made no allocation for a long-proposed natural gas pipeline from Iran that had sparked complaints from the United States.

In not budgeting for the Iranian pipeline, agreed to by his predecessor in February, Prime Minister Nawaz Sharif tactfully sidestepped a potential diplomatic clash with the United States, which had warned that the pipeline, if it were ever built, could lead to sanctions on Pakistan. The deal also was criticized as a trap for the new administration by Sharif’s brother and de facto deputy, Shahbaz Sharif, the chief minister of Punjab province.

The $35.5 billion budget, which was presented to Parliament by the new minister for finance, Ishaq Dar, suggested that the new government would follow through on Sharif’s plan to resolve the country’s power shortages that Dar said had cut the country’s economic growth by 2 percent in the outgoing fiscal year, which ends June 30.

Dar’s budget would switch Pakistan’s power generation plants from expensive imported fuel oil and gas to much cheaper coal sourced partly from undeveloped reserves in Pakistan’s southern Sindh province. The rest probably would come from huge mines in India, Pakistan’s traditional foe, with which it has fought two wars since both gained independence from Britain in 1947.

The South Asian neighbors opened talks Tuesday about the planned import of Indian electricity via cross-border cables near the eastern Pakistani city of Lahore.

The budget also sets aside about $430 million for new nuclear power plants from China, a project that the United States and India have both objected to at meetings of the Nuclear Supplier Group, one of the international groups that attempts to prevent nuclear proliferation. But Pakistan insists that the plants are unconnected to the country’s nuclear weapons program and are regularly inspected by the International Atomic Energy Agency. Pakistan possesses between 80 and 120 nuclear weapons, according to estimates by Western analysts.

A Cabinet minister, speaking to McClatchy on condition of anonymity because he was not authorized to discuss the project with a reporter, said the Iranian gas pipeline hadn’t been altogether dropped, largely because that would invoke a penalty payment to Iran. Instead, he said, Pakistan’s new government would procrastinate by trying to haggle lower prices from Tehran, based on the comparison with coal.

Analysts also said Sharif could forgo the Iranian pipeline because of the prime minister’s good relations with Saudi Arabia. Sharif spent six years in exile in the Persian Gulf kingdom as part of a deal for his release from jail in Pakistan negotiated by the Saudi royal family, after he was overthrown in a military coup staged by Gen. Pervez Musharraf in October 1999....

Despite pressure from the United States, the government has officially announced in its Annual Plan 2013-14 that it will implement the Iran-Pakistan gas pipeline project, targeting the first flow of gas in December 2014.According to the energy strategy unveiled by the Pakistan Muslim League-Nawaz government in the Annual Plan 2013-14 released on Wednesday, the project’s cost has been reduced to $1.25 billion against earlier estimates of $1.5 billion.Under the IP gas pipeline project, Pakistan will import 750 mmcfd of gas to generate 4,000 Megawatts of power to overcome the crippling power crisis.According to the plan, the government plans to appoint a third party inspection agency for the IP project in June-July 2013. It has also planned to procure equipment and material to begin construction in the financial year 2013-14. The government has also targeted to complete the construction of Pakistan’s portion of the pipeline in the new fiscal year, at which time the first gas flows are expected to begin.

At the same time, Prime Minister Nawaz Sharif’s government is also planning on committing to the Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline project. Under this project, about 3.2 billion cubic feet per day of gas will flow through the 1,680 kilometre-long pipeline. The estimated cost of the pipeline is about $7.6 billion.During the fiscal year 2012-13, which will end by the end of this month, the expected local production of oil was 74,000 barrels per day against a target of 69,000 barrels per day, exceeding the target by 5,000 barrels per day.However, gas production fell short of the target, as the domestic gas production was expected to be 4,200 mmcfd against the 4,791 mmcfd target.A total of only 83 wells (30 exploratory and 53 appraisal/development wells) were expected to be drilled against a target of 100 wells.

The Pakistani government said it expects to discuss the possible extension of a natural gas pipeline from Iran during talks this week with Chinese officials.

Pakistani Petroleum Secretary Abid Saeed said the project could be completed by the end of next year. He said Pakistan will receive 750 million cubic feet of natural gas from Iran each day through the pipeline once all operations are completed.

India has been included as potential partner in the pipeline. The U.S. government favors a rival project planned from Turkmenistan through Afghanistan, Pakistan and India.

Pakistan hosted Chinese delegates Monday to discuss extending the Iranian pipeline through to western China, the Press Trust of India reported.

Both sides are expected to review options for oil links as well, the Indian newspaper said. Pakistan's aging infrastructure and energy sector mismanagement has left most the country without a reliable source of electricity.

Islamabad said a looming energy crisis in the country is a greater threat than terrorism. India, meanwhile, relies on natural gas imports because it lacks the infrastructure necessary to take advantage of its own reserves.

Chinese economic expansion is such that its energy demands are outpacing the rest of the world.

Here's a News story on US agreeing to help Pakistan with shale gas development:

ISLAMABAD: In a major development the US has agreed to extend the technical help for the exploration of shale gas reserves in Pakistan and to this effect a US company is all set to initiate a study for an exact assessment of oil and gas reserves – particularly the shale gas – available in Pakistan, an official told The News.

The study is to take nine months to be completed, reveals one of the senior officials – who were part of the high level delegation that recently visited the US and held dialogues on energy in Washington and Houston between November 12 and 16.

The delegation – headed by the Minister for Petroleum and Natural Resources Shahid Khaqan Abbasi – comprised of secretaries and heads of public sector entities.

Later, the petroleum ministry signed an agreement with the US consultant Advanced Engineering Associates International, Inc (AEAI) that would embark on the strategic study to assess the actual reserves of shale gas in Pakistan and then with the help of the US experts four methods would be formulated to exploit the shale gas reserves.

The Director General Petroleum Concession Saeed Ullah Shah said the study will be completed in nine months. To a question, he said that the USAID would finance the study.

The EIA (Energy Information Administration) — US federal authority on energy statistics and analysis – in June last said that Pakistan was estimated to have fresh recoverable shale gas reserves of 105 trillion cubic feet (TCF) and more than nine billion barrels of oil.

The official said Pakistan has conventional gas reserves of just 23 TCF and conventional oil reserves of 286 million barrel per day. “We have set the date to AEAI for the exact identification and authentication of shale gas reserves,” he said.

“Shale gas had seen tremendous developments in the United States and a couple of other countries were trying to use the latest energy source. Pakistan was also encouraging exploration and production companies to venture into the field,” said the official. Secretary petroleum and natural resources Abid Saeed said that US officials showed willingness to help Pakistan in coping with energy crisis and extend the technical expertise and training to Pakistan’s officials in shale gas exploitation. USAID has already helped Pakistan in formulating the shale gas policy.

Electricity-starved Pakistan is close to signing a deal with Qatar worth as much as $2.5bn a year for the supply of liquefied natural gas (LNG) from the Gulf emirate to fuel Pakistan’s power grid, according to senior officials in Islamabad.“This will be the last winter of discontent,” said Shahid Khaqan Abbassi, Pakistan’s petroleum minister, in a reference to the long power cuts that have for years angered Pakistani industrialists and householders. He promised a “major improvement” in gas supplies next year after particular severe shortages this winter.

Mr Abbassi is close to signing an agreement for the import of LNG from early 2015. Although the government has yet to name a supplier formally, Mr Abbassi and other officials from his ministry said that Qatar was the expected seller.“If we can provide gas to those of our power generation plants that run on gas, [electricity cuts] will go down by half,” said Mr Abbassi. Demand for natural gas in Pakistan, a country of 180m people, is estimated at 8bn cubic feet per day, double the amount produced locally from gas fields in the south of the country.Pakistan has also negotiated an agreement to buy gas to be piped from neighbouring Iran, but implementation of the project has been has been hampered by lack of financing and by US opposition.Mr Abbassi expects Pakistan to buy some 3.5m tonnes of LNG a year from Qatar, meeting only part of the country’s shortfall.Before the winter, Mr Abbassi alarmed his cabinet colleagues when he told them that for the first time in Pakistan’s history gas supply this year would not be sufficient to meet the needs of domestic consumers – even if supplies to commercial and industrial buyers were suspended.Nawaz Sharif, prime minister, ordered Mr Abbassi to “take emergency steps” to tackle the situation, according to a senior official working with Mr Sharif. “Failure to provide gas will only enlarge the political risk [to the government],” the official said.Growing energy shortages in recent years have prompted street demonstrations that only add to political instability in Pakistan.Some critics have questioned Pakistan’s ability to keep up with the payments for future LNG supplies given the country’s weak finances, although the gas would partly replace oil used for power generation. “That may spare foreign exchange and allow the authorities to pay for at least part of the gas imports,” said Sakib Sherani, a former finance ministry adviserThe discussions with Qatar have deepened uncertainty over an earlier plan by Pakistan to build a pipeline to the Iranian border to import gas from Iran’s South Pars gas field. Mr Abbassi refused to comment on that project, and said only that “Pakistan will need more gas even after the LNG project. We are looking at all possible avenues.”

Modi on petroleum exploration in Pakistan: Referring to the exploration scope in the region, he said Pakistan has started exploring the area across the border for gas and petroleum products.

"Look across the border in Pakistan, they have started massive work in gas and petroleum sector, why can't we?" he asked.

"It is the same region. There is immense scope for gas and petroleum here. I am sure we can definitely find it here as well. It can give new strength to our nation."

Addressing the youths, he said there will be opportunities in the exploration work in future and asked them to prepare themselves for it.

"We have started a petroleum university in Gujarat and this is for youngsters. I would urge the youth here to go on Internet and search about petroleum university. I invite you to make full use of it," he said.http://news.outlookindia.com/items.aspx?artid=836884

Pakistan has sent samples of shale gas to the United States to determine the prospects of reserves of this untapped energy source following encouraging estimates given by the US Energy Information Administration (EIA), officials say.According to the EIA assessment, Pakistan holds massive shale gas reserves estimated at 51 trillion cubic feet (tcf), close to the conventional gas reserves of 58 tcf.

At present, the government is conducting a study with the technical assistance of US Agency for International Development to prove the presence of huge shale gas deposits in the country.Sources disclose that USAID has provided $1.8 million in technical assistance for undertaking the study. “Some samples have been sent to the US and research work will be completed in one year,” an official said, adding they were also looking for adopting US technology.Washington is also imparting technical training to Pakistani officials and employees and engineers of public sector oil and gas companies.The Ministry of Petroleum and Natural Resources has sent a summary to the Economic Coordination Committee (ECC) of the cabinet, seeking the go-ahead for initiating a pilot project to search and consume the shale gas potential. The move is aimed at gradually bridging the yawning gap between demand and supply of energy.Shale gas is natural gas that is found trapped within shale formations. It has low permeability compared to conventional reserves, that’s why it does not come out easily and a specific amount of investment and pricing are required to encourage its exploitation.At present, Pakistan is not producing shale gas and needs to undertake significant initial work to tap this energy resource.The US, after the discovery of massive shale gas deposits there in recent years, has become a gas-exporting country. In future, reports say, it will experience a boom in shale oil production as well and will become the largest oil producer.Officials point out that Pakistan will offer $12 per million British thermal units (mmbtu) to gas exploration and production companies under the pilot programme, a price that is close to the cost of gas to be imported from Iran under the Iran-Pakistan pipeline project.“A policy framework has been prepared and its approval will be sought from the ECC in its upcoming meeting,” an official of the petroleum ministry told The Express Tribune.According to the official, exploration companies have already found some traces of shale gas during the search for conventional gas as 10% to 12% of shale gas appears on upper faces of conventional gas.Experts suggest that Pakistan has consumed around 40% of conventional gas reserves and shale gas is the most viable option to meet growing energy needs.A study conducted by a group of exploration and production companies says the production of shale gas will be economical at about 80% of the price of Brent crude, but this will have to be brought down to 70%.Apart from shale gas, the government is also planning to drill 400 wells in the next four years in an effort to enhance the country’s oil and gas production.Though in the past one year new gas deposits had been found, total production of the country stood at almost the same level at four billion cubic feet per day because of depletion of reserves in old fields.According to officials, the country has added 500 million cubic feet of gas per day (mmcfd) from new finds, but a quantity more than that has been depleted. Therefore, the impact of additional 500 mmcfd is not reflected in overall production.However, oil output has risen to near 100,000 barrels per day compared to 74,000 barrels per day earlier.

Here's a Texas news story about Pakistan seeking help of a Pakistani-American oilman in Midland, Tx to develop Pakistani shale oil and gas:

Among those drawn to the Permian Basin is Jalil Abbas Jilani, Pakistan’s ambassador to the United States, who made a brief trip to Midland Wednesday.

“Pakistan has huge oil and gas reserves and we’re looking at this area for investors interested in joint ventures,” explained the ambassador, speaking by phone as he headed to the airport to fly to Houston. He was accompanied by Afzaal Mahmood, general consul for Pakistan stationed in Houston.

Jilani said he was impressed “by the things happening in Midland” and that he was warmly received at the luncheon attended by local oil men, including Don Evans as well as Midland Mayor Jerry Morales and Jose Cuevas, owner of JumBurrito. He said he hopes local businesses will consider participating in what he described as significant opportunities in Pakistan.

Anwar, a native of Pakistan, explained that the ambassador was making an “exculpatory” visit to Midland to gauge interest in helping Pakistan develop its unconventional hydrocarbons.

“They have an acute shortage of natural gas. They used to have conventional gas reserves, but with population growth and economic expansion,” they’re experiencing a shortfall, Anwar said.

The U.S. Energy Information Administration cited a Pakistani government report that the country had a natural gas shortfall of 912 billion cubic feet in 2013, though its dry natural gas production has grown by over 80 percent over the last decade to 1,462 Bcf in 2012.

Pakistan’s first LNG terminal is finally on track to come onstream by early 2015, but whether the country can afford LNG imports is still in doubt, according to analysts.Houston-based Excelerate Energy has agreed to install an FSRU off the coast near Port Qasim by the end of Q1 next year, which it will lease to Pakistan for 15 years, Daniel Bustos, Excelerate’s chief development officer, told Interfax. Meanwhile, Pakistani conglomerate Engro Corp. is laying the pipelines and other infrastructure needed to deliver the LNG into the market, under an LNG service deal it reached with state distributor Sui Southern Gas Co. earlier this year. In addition, consultancy FGE was appointed in September to advise the government in negotiations for “viable and competitive” LNG supplies. These agreements have given the project considerable momentum following years of corruption scandals and other setbacks. “Previously, the government always tried to get the supply before putting the terminal in place, and that brought delays over and over again,” said Bustos. “What they’re doing now is running the process in parallel, but they started with the terminal. The big advantage of that is that when the suppliers see the terminal is a reality, they get more aggressive in dealing with the customers and are more willing to close a deal,” he added. The FSRU will have the capacity to store 151,000 cubic metres and import 3.5 mtpa, or 11.3 million cubic metres per day (MMcm/d). According to Engro, the volume would reduce Pakistan’s gas shortfall of 45.3 MMcm/d by 25%. ---. Domestic output – the country’s only source of gas at present – declined from a 10-year peak of 41.2 billion cubic metres in 2012 to 38.6 bcm in 2013, according to statistics from BP. The need for more gas could underpin the development of a second terminal close behind the Excelerate FSRU, Bustos said. Local news reports in September said Sui Southern Gas planned to issue a tender within weeks for a 5.7 MMcm/d regasification facility. “It’s a market that has tremendous possibilities to grow,” said Bustos. “Pakistan is following in the path of Argentina and Brazil in terms of continuing to add units – once they start seeing the benefits of FSRUs, they keep going back to the same concept.”Credit problems While the terminal’s development appears to be moving ahead, it is harder to discern any progress in the government’s LNG supply negotiations – although the finance minister said it is looking to secure the full 3.5 mtpa. Islamabad has been in discussions with Qatar over the past few years, but the seller’s demand for a high oil-linked price was reportedly an issue when the two sides met in July. There have also been suggestions Pakistan is beginning talks with Malaysia’s Petronas, which is expanding its large Bintulu LNG complex. However, Pakistan’s ability to sign deals for long- or short-term LNG is questionable, particularly because the country’s credit risk would require it to pay more than already high Asian LNG prices. “As a marketer of spot LNG, your main concern is your buyer’s creditworthiness, and we’ve seen other credit-insecure LNG buyers such as Argentina having to pay for cargoes with cash in advance – that precedent is already set,” said Benjamin Gage, an associate director of global LNG at IHS.------“The project will be subject to scrutiny and it will be closely watched, particularly in the context of intensified pressure on the government over its record of attracting investment and bolstering energy security, and as opposition parties seek to seize on opportunities to weaken government credibility,” said Fry.

A 2008 report in Brookings spells out the close military relationship with the Saudis, which shows there’s a precedent for Pakistani action in Yemen:

Pakistan has provided military aid and expertise to the kingdom for decades. It began with help to the Royal Saudi Air Force to build and pilot its first jet fighters in the 1960s. Pakistani Air Force pilots flew RSAF Lightnings that repulsed a South Yemeni incursion into the kingdom’s southern border in 1969. In the 1970s and 1980s, up to 15,000 Pakistani troops were stationed in the kingdom, some in a brigade combat force near the Israeli-Jordanian-Saudi border.

Pakistani engineers also helped build fortifications along the southern Saudi border, in part to help counter Houthi rebels, according to the Diplomat. Up until the First Gulf War, there was a detachment of thousands of Pakistani soldiers posted in Saudi Arabia.

The Saudi military has markedly improved its capabilities since those days; the kingdom recently became the world’s biggest arms importer. But Pakistani manpower still comes in handy in the petro-rich countries of the Gulf, where foreign nationals often staff a whole range of state institutions.

The Sunni monarchy that rules over Bahrain has employed thousands of Pakistanis in its security services, who, during the 2011 pro-democracy protests in the Shiite-majority country, delivered orders to protesters in English and Urdu.

"Our own [Shiites] cannot join the security forces, but the government recruits from abroad," one Bahraini activist told Al Jazeera in 2011.

Opposition politicians in Pakistan are understandably concerned. "Given...our own internal sectarian terrorism, Pakistan cannot afford to get embroiled in any Shia-Sunni conflict in the Gulf and Middle East," said Shireen Mazari, a leader of the Movement for Justice party, in a statement. "Pakistan must stay strictly neutral."

Recently, Prime Minister Nawaz Sharif confirmed that a “threat to Saudi Arabia will evoke strong reaction from Pakistan” during a meeting with the top defence-related brass, which was convened after the Kingdom’s offensive against the Houthi rebels in Yemen started. While a lot of Pakistanis are not in favour of going into what they perceive as a sectarian conflict, they fail to recognise both the strategic and economic implications if Pakistan does not support the Saudi Arabia-led offensive against the Houthi rebels. Firstly, the PML-N led government has every right to take this decision based on the number of representatives it has in parliament. However, what needs to be understood is that it’s not just the government, but also the military establishment which is backing the whole offensive due to strategic compulsions.

The two arguments against the engagement of Pakistani troops in Yemen and Saudi Arabia are: why engage our troops in a foreign country when we are fighting our own war; and why be part of a sectarian conflict? The truth is that a nation’s foreign policy is not driven by emotions but is based on long-term economic and strategic security concerns. Pakistan has taken part in Arab conflicts in the past. Fighter pilots from the Pakistan Air Force had flown Royal Saudi Air Force jets to repel an incursion from south Yemen in 1969. One should also remember that there are 400 Pakistani military trainers present in the Kingdom, already training Saudis on border management against the Islamic State on the Iraqi border.

The recent decision to support Saudi Arabia in this conflict is backed both, by the military and civilian leaderships, which see the stability of Saudi Arabia in Pakistan’s interest for two reasons: millions of Pakistanis work in the Gulf Cooperation Council (GCC) countries with the highest number being in Saudi Arabia. Apart from that, the GCC remains the largest source of foreign exchange for Pakistan. In addition, Saudi Arabia remains Pakistan’s biggest strategic ally and helps meet our energy needs. Instability within the GCC and Saudi Arabia would mean millions of Pakistanis coming back jobless, hurting us economically. We have seen what happened to Pakistanis living in Kuwait after Iraq invaded that country.

The question remains: will Pakistan’s participation in the operation in Yemen hurt Pakistan’s own war? No. Our military and air force deployment inside Saudi Arabia will be limited in numbers and the decision regarding this should be left to the military command. We regularly send troops on UN missions. Does our participation in these missions affect us? No. Secondly, the perception that the Yemen conflict is sectarian in nature is only because of Iran’s support to the Houthi rebels. In reality, this is more of an ethnic conflict with there being a quest for political power. Pakistan’s foreign policy with regards to Iran traditionally has been to defend Iran too. Hence, a serious diplomatic effort from our foreign office should be made to convince Iran that its stability as well as that of Saudi Arabia is vital for Pakistan. We cannot ignore either country.

We must also understand that there are more than 10 Muslim countries, including Turkey, backing the strikes in Yemen against the Houthis and Pakistan will eventually have to choose sides or lose support from our biggest strategic partners and energy providers. It is now up to the prime minister and his government to cash in on the opportunity and get a good economic deal for Pakistan in exchange for providing security for the GCC countries.

Pakistan could gain economically if a sound deal is negotiated for providing jobs to Pakistanis in the GCC countries, as well as negotiating a better energy deal. A good economic package negotiated at an appropriate time to benefit all Pakistanis will help the case for a greater military role in the GCC countries.

China will build a pipeline to bring natural gas from Iran to Pakistan to help address Pakistan’s acute energy shortage, under a deal to be signed during the Chinese president’s visit to Islamabad this month, Pakistani officials said.

The arrival of President Xi Jinping is expected to showcase China’s commitment to infrastructure development in ally Pakistan, at a time when few other countries are willing to make major investments in cash-strapped, terrorism-plagued, Pakistan.

The pipeline would amount to an early benefit for both Pakistan and Iran from the framework agreement reached earlier this month between Tehran and the U.S. and other world powers to prevent Iran from developing nuclear weapons. The U.S. had previously threatened Pakistan with sanctions if it went ahead with the project.

The pipeline will bring much-needed gas to Pakistan, which suffers from a crippling electricity deficit because of a shortage of fuel for its power-generation plants. Pakistan has been negotiating for months behind the scenes for China to build the Pakistani portion of the pipeline, which will cost up to $2 billion.

Tehran says that its 560-mile (900-kilometer) part of the pipeline from an Iranian gas field is complete. Iran has long pressed Pakistan to build its half of the scheme.

Pakistan hasn’t begun construction, however, in light of threatened sanctions from the U.S. for trading with Iran. Islamabad had been trying to work around the sanctions by asking the Chinese to construct the pipeline but not yet connect it to the Iranian portion. The prospect of an Iran nuclear agreement, which would ease the sanctions in stages once the deal is completed, has given Islamabad further impetus to clear the project. Among the first restrictions to be lifted, according to the framework accord, would be prohibitions on Iranian energy exports.

“This [Iran nuclear agreement] will help us in getting a few things which were coming into the way of the Iran-Pakistan gas pipeline to be cleared and we will move forward,” Pakistan’s ambassador to Iran, Noor Muhammad Jadmani, said Sunday in Tehran, according a report on IRNA, the official Iranian news agency.

Pakistan is negotiating with China Petroleum Pipeline Bureau, a subsidiary of Chinese energy giant China National Petroleum Corporation, to build 435 miles (700 kilometers) of pipeline from the western Pakistani port of Gwadar to Nawabshah in the southern province of Sindh, where it will connect to Pakistan’s existing gas-distribution pipeline network.

China Petroleum Pipeline Bureau referred questions to CNPC, which didn’t respond to a request for comment.

The cost would be $1.5 billion to $1.8 billion for the pipeline, or $2 billion if an optional Liquefied Natural Gas terminal at Gwadar is included in the scheme. Under the deal, 85% of the financing will be provided by a Chinese loan, with Pakistan coming up with the rest.

The remaining 50 miles (80 kilometers), from Gwadar to the Iranian border, will be built by Pakistan. The pipeline, which would take two years to build, would eventually supply Pakistan with enough gas to fuel 4,500 megawatts of electricity generation—almost as much as the country’s entire current electricity shortfall.

The pipeline would give Iran a market to its east for its gas. The pipeline scheme, conceived in 1995, originally was supposed to extend to India. Tehran blames U.S. pressure for India dropping out in 2009.

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About Me

I am the Founder and President of PakAlumni Worldwide, a global social network for Pakistanis, South Asians and their friends. I also served as Chairman of the NEDians Convention 2007. In addition to being a South Asia watcher, an investor, business consultant and avid follower of the world financial markets, I have more than 25 years experience in the hi-tech industry. I have been on the faculties of Rutgers University and NED Engineering University and cofounded two high-tech startups, Cautella, Inc. and DynArray Corp and managed multi-million dollar P&Ls. I am a pioneer of the PC and mobile businesses and I have held senior management positions in hardware and software development of Intel’s microprocessor product line from 8086 to Pentium processors. My experience includes senior roles in marketing, engineering and business management. I was recognized as “Person of the Year” by PC Magazine for my contribution to 80386 program. I have an MS degree in Electrical engineering from the New Jersey Institute of Technology.
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